Twitter tops estimates for sales, user growth in 2Q

A file photo of the New York Stock Exchange prior to the Twitter IPO, Thursday, Nov. 7, 2013 in New York.

The microblogging company's active membership in the quarter reached 271 million, with year-over-year growth at 24 percent, compared with 25 percent in the prior period, Twitter said in a statement today. Sales more than doubled to $312.2 million, exceeding the $282.8 million analyst estimate compiled by Bloomberg.

The San Francisco-based company is maintaining its rate of attracting new members after reporting two straight quarters of decelerating user growth. The slowdown, coming so soon after Twitter's November initial public offering, stoked investor concerns that the company's fastest sales growth was behind it. Chief Executive Officer Dick Costolo responded by gutting Twitter's executive ranks, including replacing his chief financial officer and parting ways with his operating chief.

"Everyone has been so fixated on the user growth metrics," said Scott Kessler, an analyst at S&P Capital IQ. "Beyond that, their mobile-advertising network has become more important and more valuable as the months have gone on."

Shares soared more than 20 percent in extended trading, after rising 1.8 percent to $38.60 at the close. The stock, which closed at a high of $73.31 on Dec. 26, has plunged 47 percent since then on concerns that Twitter isn't growing fast enough to justify its valuation. The company is among the most expensive in technology based on projected 2014 sales.

Net Loss

The net loss widened to $144.6 million, or 24 cents a share, from $42 million a year earlier. Excluding some items, the company reported a 2 cent profit, compared with the 1 cent loss estimated by analysts polled by Bloomberg.

For the current quarter, Twitter said revenue will be $330 million to $340 million, exceeding analysts' average estimate of $323.1 million.

People viewed their Twitter timelines more often, with 173 billion views, up from 157 billion in the prior quarter.

Twitter rival Facebook Inc. also grappled with investor questions about its business shortly after its May 2012 IPO. The Menlo Park, California-based social network has since quelled the concerns by moving swiftly into mobile promotions, which now make up the majority of its ad revenue. Last week, the company's stock surged to a record after it posted a 61 percent second- quarter revenue increase and net income more than doubled.

Board Questions

Costolo has faced questions from Twitter's board about how he plans to stem user growth issues, people familiar with the discussions have said. The company this month replaced CFO Mike Gupta with former Goldman Sachs Group Inc. banker Anthony Noto, who helped take the company public. It was the fourth major change among Costolo's top lieutenants this year, after the exits of COO Ali Rowghani, head of engineering Christopher Fry and vice president of consumer products Michael Sippey.

In April, Costolo hired Google Inc. maps executive Daniel Graf as the new vice president of consumer products, followed by the May appointment of engineering chief Alexander Roetter, who was already at the company. The COO role is going unfilled.

To diversify revenue while it seeks to rev up user growth, Twitter has expanded its advertising business beyond its site so that membership issues take less of a toll on revenue. The company now distributes ads to about TK1 billion smartphones and tablets through a mobile-advertising exchange it acquired last year called MoPub Inc.

Deals Streak

This month, Twitter also agreed to pay almost $100 million to acquire TapCommerce, which targets people on mobile phones or tablets with ads for items they've expressed interest in buying around the Internet, urging them to complete the purchase. Twitter also bought CardSpring Inc., which will help shoppers secure deals for items they see in the microblogging service's ads.

Twitter is still on track to enlarge its digital advertising. The company's share of worldwide digital ad revenue is estimated to rise to 0.8 percent this year, up from 0.5 percent last year, according to EMarketer Inc. Its slice of digital mobile advertising is set to increase to 2.8 percent this year from 2.4 percent last year, according to the researcher. In total, digital ad spending is projected reach $140 billion this year, said EMarketer.

Twitter tops estimates for sales, user growth in 2Q

A file photo of the New York Stock Exchange prior to the Twitter IPO, Thursday, Nov. 7, 2013 in New York.

The microblogging company's active membership in the quarter reached 271 million, with year-over-year growth at 24 percent, compared with 25 percent in the prior period, Twitter said in a statement today. Sales more than doubled to $312.2 million, exceeding the $282.8 million analyst estimate compiled by Bloomberg.

The San Francisco-based company is maintaining its rate of attracting new members after reporting two straight quarters of decelerating user growth. The slowdown, coming so soon after Twitter's November initial public offering, stoked investor concerns that the company's fastest sales growth was behind it. Chief Executive Officer Dick Costolo responded by gutting Twitter's executive ranks, including replacing his chief financial officer and parting ways with his operating chief.

"Everyone has been so fixated on the user growth metrics," said Scott Kessler, an analyst at S&P Capital IQ. "Beyond that, their mobile-advertising network has become more important and more valuable as the months have gone on."

Shares soared more than 20 percent in extended trading, after rising 1.8 percent to $38.60 at the close. The stock, which closed at a high of $73.31 on Dec. 26, has plunged 47 percent since then on concerns that Twitter isn't growing fast enough to justify its valuation. The company is among the most expensive in technology based on projected 2014 sales.

Net Loss

The net loss widened to $144.6 million, or 24 cents a share, from $42 million a year earlier. Excluding some items, the company reported a 2 cent profit, compared with the 1 cent loss estimated by analysts polled by Bloomberg.

For the current quarter, Twitter said revenue will be $330 million to $340 million, exceeding analysts' average estimate of $323.1 million.

People viewed their Twitter timelines more often, with 173 billion views, up from 157 billion in the prior quarter.

Twitter rival Facebook Inc. also grappled with investor questions about its business shortly after its May 2012 IPO. The Menlo Park, California-based social network has since quelled the concerns by moving swiftly into mobile promotions, which now make up the majority of its ad revenue. Last week, the company's stock surged to a record after it posted a 61 percent second- quarter revenue increase and net income more than doubled.

Board Questions

Costolo has faced questions from Twitter's board about how he plans to stem user growth issues, people familiar with the discussions have said. The company this month replaced CFO Mike Gupta with former Goldman Sachs Group Inc. banker Anthony Noto, who helped take the company public. It was the fourth major change among Costolo's top lieutenants this year, after the exits of COO Ali Rowghani, head of engineering Christopher Fry and vice president of consumer products Michael Sippey.

In April, Costolo hired Google Inc. maps executive Daniel Graf as the new vice president of consumer products, followed by the May appointment of engineering chief Alexander Roetter, who was already at the company. The COO role is going unfilled.

To diversify revenue while it seeks to rev up user growth, Twitter has expanded its advertising business beyond its site so that membership issues take less of a toll on revenue. The company now distributes ads to about TK1 billion smartphones and tablets through a mobile-advertising exchange it acquired last year called MoPub Inc.

Deals Streak

This month, Twitter also agreed to pay almost $100 million to acquire TapCommerce, which targets people on mobile phones or tablets with ads for items they've expressed interest in buying around the Internet, urging them to complete the purchase. Twitter also bought CardSpring Inc., which will help shoppers secure deals for items they see in the microblogging service's ads.

Twitter is still on track to enlarge its digital advertising. The company's share of worldwide digital ad revenue is estimated to rise to 0.8 percent this year, up from 0.5 percent last year, according to EMarketer Inc. Its slice of digital mobile advertising is set to increase to 2.8 percent this year from 2.4 percent last year, according to the researcher. In total, digital ad spending is projected reach $140 billion this year, said EMarketer.